MONITORING REPORT FORM (CDM-SCC -MR) Version 01 - in effect as of: 28/09/2010 CONTENTS

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1 MONITORING REPORT FORM (CDM-SCC -MR) Version 01 - in effect as of: 28/09/2010 CONTENTS A. General description of the project activity A.1. Brief description of the project activity A.2. Project participants A.3. Location of the project activity A.4. Technical description of the project A.5. Title, reference and version of the baseline and monitoring methodology applied to the project activity A.6. Registration date of the project activity A.7. Crediting period of the project activity and related information A.8. Name of responsible person(s)/entity(ies) B. Implementation of the project activity B.1. Implementation status of the project activity B.2. Revision of the monitoring plan B.3. Request for deviation applied to this monitoring period B.4. Notification or request of approval of changes C. Description of the monitoring system D. Data and parameters monitored D.1. Data and parameters used to calculate baseline emissions D.2. Data and parameters used to calculate project emissions D.3. Data and parameters used to calculate leakage emissions D.4. Other relevant data and parameters E. Emission reductions calculation E.1. Baseline emissions calculation E.2. Project emissions calculation E.3. Leakage calculation E.4. Emission reductions calculation E.5. Comparison of actual emission reductions with estimates in the registered CDM-PDD E.6. Remarks on difference from estimated value 1

2 MONITORING REPORT Version 05-27/11/2012 Ceará Renewable Energy Bundled Project GS1042 First monitoring period from 01/09/10-31/12/11 (days included) SECTION A. General description of the project activity A.1. Brief description of the project activity: The project activity is the bundled project of five red ceramic factories belonging to Grupo Tavares, a family business that owns several ceramic factories in the State of Ceará, Brazil. The following ceramic factories are included in this project: Antônio Ceramic, Ceará Ceramic, Ceagra Ceramic, Eliane Ceramic and Santa Rita Ceramic. Antônio Ceramic and Eliane Ceramic are located at Itaitinga, in the state of Ceará, northeast region of Brazil. Ceará Ceramic and Ceagra Ceramic are located at Aquiraz, also in the State of Ceará. Santa Rita Ceramic is located at São Gonçalo do Amarante, also in the State of Ceará. The ceramic factories produce ceramic bricks, tiles and construction blocks, destined mainly for the regional market in the metropolitan area of Fortaleza. All ceramics used to utilize predominantly wood without sustainable forest management as fuel. The use of this type of non-renewable biomass is a common practice in the ceramic industry. Firewood used to be the most employed source of primary energy until 1970 s, when the petroleum started to supply the majority of Brazilian s energy needs 1. Moreover, the Brazilian Energy and Mine Ministry has been monitoring every energy sector of Brazil since 1970, and firewood appears over the years monitored as a significant source of thermal energy for ceramic sector 2. This project activity reduces the greenhouse gases (GHG) emissions through the substitution of nonrenewable biomass for renewable biomasses to generate thermal energy. As renewable biomasses, the project activity utilizes mostly biomass residues (such as cashew nut shells, residues from cashew tree, coconut residues, sawdust) and wood from sustainable forest management plan areas to feed the ceramic s kilns. The project also involves energy efficiency measures, such as improved fuel handling and kilns improvement to reduce the necessary energy per production output 3. This project points out the possibility for switching from non-renewable biomass to renewable biomasses, which is unattractive due some barriers, including higher fuel costs, uncertainties associated to the fuel switch and the lack of knowledge to operate with renewable biomass. The ceramic owners have considered the income from the commercialization of the carbon credits to make the project activity viable. The main goal of this project activity is to minimize the negative impacts of deforestation to obtain firewood, whose consumption also leads to GHG emissions that contribute to climate change. Moreover, in opposition to the identified baseline, the project activity generates thermal energy exclusively from renewable sources, by using abundant renewable biomasses in the region. All these measures contribute to sustainable development by promoting renewable energy, mitigating atmospheric pollution and improving the quality of employment for the ceramic workers. 1 BRITO, J.O. The use of wood as energy. Available at: < Last visited on 23/03/ Energy Research Company. National Energy Balance - energy consumption per sector. Available at: < Last visited on 23/03/ No emission reductions are claimed for energy efficiency measures, since these are applied after the complete fuel switch to renewable biomass.

3 By the beginning of 2010, Grupo Tavares begun tests with renewable biomass in the five ceramic factories included in the current project. The start date of the project activity is considered 02/07/2010, when Grupo Tavares and Sustainable Carbon signed contracts for the development of a GHG emission reduction project in the five ceramic factories included in the current project. All ceramics have operated exclusively with demonstrably renewable biomass since the beginning of the crediting period, which is defined as 01/09/2010. The emission reductions due to the switching of non-renewable fuel (non-renewable wood) to renewable biomasses resulted in 40,577 tco 2 e during the monitoring period from 01/09/2010 to 31/12/2011. The contribution to sustainability is being monitored applying the Sustainability Monitoring Plan, described on Section G of the Gold Standard Passport, version 05. A.2. Project Participants Name of the party involved(*) ((host) indicates a host party Brazil (host) Table 01. Project participants Private and/or public entity(ies) project participants (*) (as applicable) Sustainable Carbon - Projetos Ambientais Ltda Antônio Cavalcante de Souza Olaria-ME Ceará Cerâmica Ltda Ceagra Cerâmica e Agropecuária Assunção Ltda Eliane Cavalcante de Souza EPP Cerâmica Santa Rita Ltda Kindly indicate if the Party involved wishes to be considered as project participant (Yes/No) No No No No No No (*) In accordance with the CDM modalities and procedures, at the time of making the CDM-PDD public at the stage of validation, a Party involved may or may not have provided its approval. At the time of requesting registration, the approval by the Party(ies) involved is required. However, this is a voluntary project. Hence, no approval from the Host Party is needed. A.3. Location of the project activity: The ceramics are located in Brazil, in the state of Ceará in the northeast region of the country. The geographic location is illustrated in Figure 01.

4 Table 02. Location of the ceramics Ceramic Latitude Longitude Postal Adress 4 0'42.01"S 38 31'15.00"W Antônio Ceramic Ceará Ceramic 4 0'35.76"S 38 31'9.81"W 4 0'38.71"S 38 31'5.94"W 4 0'45.04"S 38 31'10.28"W 4 1'26.94"S 38 29'42.65"W 4 1'19.36"S 38 29'50.76"W 4 1'14.27"S 38 29'46.78"W 4 1'21.63"S 38 29'36.64"W Rodovia BR 116, Km 28, s/n, Riachão CEP City of Itaitinga, State of Ceará Rodovia BR 116, Km 32, s/n, Sítio Terra do Sol CEP City of Aquiraz, State of Ceará 3 59'38.63"S 38 30'57.44"W Ceagra Ceramic 3 59'27.09"S 3 59'32.55"S 38 30'56.27"W 38 30'49.93"W Rodovia BR 116, Km 28, s/n, Riachão CEP City of Aquiraz, State of Ceará 3 59'39.20"S 38 30'53.34"W 3 58'36.08"S 38 30'52.04"W Eliane Ceramic 3 58'38.07"S 3 58'32.51"S 38 31'0.01"W 38 31'0.85"W Rodovia BR 116, Km 26, s/n CEP City of Itaitinga, State of Ceará 3 58'31.87"S 38 30'52.57"W Santa Rita Ceramic Site '31.53"S 38 58'53.80"W Rodovia BR 222, Km 47, s/n - Railway station unit CEP City of São Gonçalo do Amarante, State of Ceará Santa Rita Ceramic Site '3.78"S 38 58'43.83"W Rodovia BR 222, Km 47, s/n -Gas station unit CEP City of São Gonçalo do Amarante, State of Ceará

5 Figure 01. Geographic location of the cities of the project activity. A.4. Technical description of the project A brief description of the situation on each ceramic before and after the initiation of the project activity follows: Antônio Ceramic: this ceramic has two Hoffmann 4 kilns. In the baseline scenario, the kilns operated predominantly using native firewood (wood without sustainable forest management) as fuel. A fraction of wood from areas with sustainable forest management plan was also used, representing around 17% of total fuel usage. As the project activity, the proponent switched its fuel to renewable biomasses such as cashew nut shell, residues from cashew tree, coconut husk and increased amounts of wood from areas with sustainable forest management plan. The ceramic also acquired new equipments, including automatic feeders, to allow an efficient use of renewable biomass as fuel. Before being cooked in the kilns, the pieces must be dried. At Antônio Ceramic, the ceramic pieces are dried naturally, so no fuel is used for the drying process. During 2009, Antônio Ceramic produced 7,921 thousands of ceramic pieces. The identified baseline for this ceramic was the utilization of a total of approximately 5,407 tonnes of non-renewable woody biomass per year to provide thermal energy to the ceramics kilns. 4 Hoffman is a very old type of kiln, which has parallel chambers where the heat from one chamber is used in the next, therefore recycling the generated heat in the previous chambers.

6 UNFCCC/CCNUCC Figure 02. Hoffmann kiln being fed with renewable biomass in Antônio Ceramic. Ceará Ceramic: this ceramic has two Hoffmann5 kilns and three round6 kilns. In the baseline scenario, the kilns operated using predominantly native firewood as fuel. A fraction of wood from areas with sustainable forest management plan was also used, representing around 38% of total fuel usage. As the project activity, the proponent switched its fuel to renewable biomasses such as cashew nut shell, residues from cashew tree, coconut husk and increased amounts of wood from areas with sustainable forest management plan. The ceramic also acquired new equipments, including automatic feeders, to allow an efficient use of renewable biomass as fuel. Before being cooked in the kilns, the pieces must be dried. At Ceará Ceramic, the ceramic pieces are dried naturally, so no fuel is used for the drying process. During 2009, Ceará Ceramic produced 11,453 thousands of ceramic pieces. The identified baseline for this ceramic was the utilization of a total of approximately 7,252 tonnes of non-renewable biomass per year on average to provide thermal energy to the ceramics kilns. Figure 03. Round and Hoffman kilns at Ceará Ceramic. 5 Hoffman is a very old type of kiln, which has parallel chambers where the heat from one chamber is used in the next, therefore recycling the generated heat in the previous chambers. 6 Round kilns are intermittent kilns with round shape and lateral furnaces. Intermittent kilns do not allow the continuous operation, as the fuel needs to be added and the kiln cleaned between each burning cycle. Intermittent kilns are not as efficient as continuous kilns (such as tunnel or Hoffmann kilns) because continuous kilns allow the better distribution of heat.

7 Ceagra Ceramic This ceramic has two Hoffmann 7 kilns. In the baseline scenario, the kilns operated predominantly using native firewood (wood without sustainable forest management) as fuel. A fraction of wood from areas with sustainable forest management plan was also used, representing around 34% of total fuel usage. As the project activity, the proponent switched its fuel to renewable biomasses such as cashew nut shells, residues from cashew tree, coconut husk and increased amounts of wood from areas with sustainable forest management plan. The ceramic also acquired new equipments, including automatic feeders, to allow an efficient use of renewable biomass as fuel. Before being cooked in the kilns, the pieces must be dried. At Ceagra Ceramic, the ceramic pieces are dried naturally, so no fuel is used for the drying process. During 2009, Ceagra Ceramic produced 14,862 thousands of ceramic pieces. The identified baseline for this ceramic was the utilization of a total of approximately 9,424 tonnes of non-renewable woody biomass per year to provide thermal energy to the ceramics kilns. Figure 04. Cashew nut shells stored prior to use as fuel in Ceagra Ceramic. Eliane Ceramic: this ceramic has one Hoffmann kiln and one chamber kiln. In the baseline scenario, the kilns operated predominantly using native firewood (wood without sustainable forest management) as fuel. A fraction of wood from areas with sustainable forest management plan was also used, though representing around 29% of total fuel usage. As the project activity, the proponent switched its fuel to renewable biomasses such as cashew nut husk, residues from cashew tree, coconut residues and increased amounts of wood from areas with sustainable forest management plan. The ceramic also acquired new equipments, including automatic feeders, to allow an efficient use of renewable biomass as fuel. In Eliane Ceramic biomass is processed to be used as fuel by several Ceramics from Grupo Tavares. Different types of biomass (such as cashew nut shells, coconut residues and wood residues) are chopped and mixed into a single product. Machinery to process biomass includes electric shredders and screeners. Before being cooked in the kilns, the pieces must be dried. At Eliane Ceramic, the ceramic pieces are dried naturally, so no fuel is used for the drying process. During 2009, Eliane Ceramic produced 8,186 thousands of ceramic pieces. The identified baseline for this ceramic was the utilization of a total of approximately 5,117 tonnes of non-renewable woody biomass per year to provide thermal energy to the ceramics kilns. 7 Hoffman is a very old type of kiln, which has parallel chambers where the heat from one chamber is used in the next, therefore recycling the generated heat in the previous chambers.

8 Figure 05. Biomass being processed to be used as fuel in Eliane Ceramic. Santa Rita Ceramic: this ceramic has three Hoffmann. In the baseline scenario, the kilns operated predominantly using native firewood as fuel. This ceramic is divided into two nearby sites (distanced 900 meters from each other). In site 1, one Hoffmann kiln is operated (named Kiln 1), while in site two, two Hoffmann kilns exist (named Kiln 2 and Kiln 3). During the validation of the PDD, the kilns in Site 2 were not operating simultaneously due to the lack of employees and infrastructure. In this monitoring period three kilns were operating during year For the calculation of emission reductions, it is assumed the third kiln has the same efficiency of the other two, since it is very similar to those in terms of physical structure and efficiency. The baseline is also considered to be the same, since this third kiln has operated predominantly with non-renewable biomass in the past. In the baseline scenario, a fraction of wood from areas with sustainable forest management plan was also used, though representing around 12% of total fuel usage. As the project activity, the proponent switched its fuel to renewable biomasses such as cashew nut shells, residues from cashew tree, coconut husk and increased amounts of wood from areas with sustainable forest management plan. The ceramic also acquired new equipments, including automatic feeders, to allow an efficient use of renewable biomass as fuel. Before being cooked in the kilns, the pieces must be dried. At Santa Rita Ceramic, the ceramic pieces are dried naturally, so no fuel is used for the drying process. During 2009, Santa Rita Ceramic produced 8,423 thousands of ceramic pieces. The identified baseline for this ceramic was the utilization of a total of approximately 5,307 tonnes of non-renewable biomass per year on average to provide thermal energy to the ceramics kilns.

9 Figure 06. Hoffmann kiln being fed with renewable biomass in Santa Rita Ceramic. This project activity reduces the greenhouse gases (GHG) emissions through the substitution of nonrenewable biomass for renewable biomasses to generate thermal energy. As renewable biomasses, the project activity utilizes mostly biomass residues (such as cashew nut shells, residues from cashew tree, coconut residues) and wood from areas with sustainable forest management plan to feed the ceramic s kilns. This project does not involve significant construction, as only auxiliary equipments are installed to allow the efficient use of biomass. Hence, the start date of construction is actually interpreted as the date when the ceramics have signed contracts with Sustainable Carbon for the development of an emission reduction project. This has occurred on 02/07/2010. Hence, the project is following the retroactive project cycle according to Gold Standard Toolkit version 2.1. A.5. Title, reference and version of the baseline and monitoring methodology applied to the project activity: The project utilizes the following methodology approved under the Clean Development Mechanism for small scale projects: AMS-I.E: Switch from Non-Renewable Biomass for Thermal Applications by the User, version 04 8, valid from 29/04/2011 to 02/08/2012. This category comprises activities to displace the use of non-renewable biomass by introducing renewable energy technologies. The technology in case of this project activity was determined as the ceramic facilities, which utilized thermal energy generated by the new renewable energy technology. The project involves the substitution of non-renewable biomass with renewable biomass in existing red ceramic factories, thus complying with the referred methodology. A.6. Registration date of the project activity: This voluntary project was registered under the Gold Standard on 05/01/2012. Registration under the CDM is not applicable to voluntary projects. 8 Methodology available at: < Last visited on 08/02/2012.

10 A.7. Crediting period of the project activity and related information (start date and choice of crediting period): The starting date of the project activity was considered 02/07/2010. On this date, the ceramics included in the project have signed contracts with Sustainable Carbon to develop an emission reduction project. The starting date of the project is before the Time of first submission as per Gold Standard definitions 9. Hence, the project is following the retroactive project cycle according to Gold Standard Toolkit version 2.1. Start date of the crediting period: 01/09/2010. End of the crediting period: 31/08/2020 Length of the crediting period: 10 years A.8. Name of responsible person(s)/entity(ies): The following entity is responsible for applying the monitoring methodology: SUSTAINABLE CARBON - PROJETOS AMBIENTAIS LTDA Project developers: Thiago de Avila Othero and Marcelo Hector Sabbagh Haddad: Technical Coordinators. Mariana dos Santos Silva and Camila Vaccari, Technical Analysts. SECTION B. Implementation of the project activity B.1. Implementation status of the project activity This voluntary project was validated by the Designated Operational Entity TÜV Rheinland (China) Ltd and this present monitoring report is being verified by the same DOE. In October, 2008 Grupo Tavares and Sustainable Carbon begun the validation of their first GHG emission reduction project, entitled Assunção Ceramic Fuel Switching Project. The project involved fuel switching to renewable biomass in another Ceramic belonging to Grupo Tavares. The Assunção Ceramic Fuel Switching Project was validated under the VCS (Verified Carbon Standard) in September, By the beginning of 2010, Grupo Tavares begun tests with renewable biomass in the five ceramic factories included in the current project. The start date of the project activity was July, 2 nd 2010, when Grupo Tavares and Sustainable Carbon signed contracts for the development of a GHG emission reduction project in the five ceramic factories included in the current project. All ceramics have operated exclusively with demonstrably renewable biomass since the beginning of the crediting period, that is defined as 01/09/2010. During the current monitoring period, the ceramics had no significant changes on its physical structure, except for Santa Rita Ceramic. Hence, no impacts on the emissions reductions were observed for this period on Antônio Ceramic, Ceará Ceramic, Ceagra Ceramic and Eliane Ceramic. In Santa Rita Ceramic, the amount of emission reductions was higher than the ex ante estimations on the PDD, since all three kilns were in operation during this monitoring period. 9 According to Gold Standard Requirements version 2.1, the time of first submission means submission of the Local Stakeholder Consultation Report for projects proceeding under the regular project cycle, and submission of the required Gold Standard project activity documentation for a Pre-Feasibility Assessment and payment of the applicable fee under the retroactive project cycle.

11 During validation, the ceramics belonging to Grupo Tavares utilized residues from cashew trees, sawdust, coconut residues, cashew nut shells, wood from sustainable management plan areas as renewable biomass instead of native wood. During the current monitored period, the companies are also utilizing Mamona (Ricinus communis) husk and Babaçu (Orbignya phalerata) residues as renewable biomasses. Therefore, it was necessary to do the Financial Barrier of these new renewable biomasses, once they were not listed as a current biomass on the PDD. Regarding the Financial Barrier, the monitored period also must be considered additional. It was done a comparison between the cost of renewable biomass per energy generated at the baseline scenario and at the current monitoring period, detailed in tables 03 and 04. Furthermore, a conservative correction factor of 15% was applied annually to the cost of the non-renewable biomass at the baseline scenario, in order to account for general price increase due to inflation 10. Chart 1. Comparison between the cost of delivery heat at the projected baseline and current monitored period. Cost of delivered heat comparison R$ 6,000 R$ 5,000 R$ 4,000 R$ 3,000 R$ 2,000 R$ 1,000 R$ 0 Antônio Ceramic Ceagra Ceramic Ceará Ceramic Eliane Ceramic Santa Rita Ceramic Projected baseline cost of delivered heat (R$/TJ) Monitored cost of delivered heat (R$/TJ) The Chart above displays the comparison of cost of delivery heat at the projected baseline scenario (year 2011) and at the current monitoring period (from September 2010 to December 2011). It can be observed that the non-renewable biomass is more financially attractive than using the renewable biomasses described above. With the project activity s implementation, the fuel spending has increased, as can be verified at the tables below. Comparing the cost per energy generated, the ceramics spend with renewable biomass BRL 3, per TJ generated against BRL R$ 1, per TJ generated with non-renewable wood (projected baseline scenario for 2011, considering a conservative correction of 15% annually). The new types of biomass introduced on this monitoring period (Mamona husk and Babaçu residues) have also shown to be more expensive on an energy basis than the baseline fuel. Cost of delivered heat for Babaçu residues averaged BRL 4, and BRL 4, for Mamona husks. 10 No methodology was found to correct the price of non-renewable biomass in Brazil, since this is mostly an informal market. A 15% correction factor is considered conservative since it is above current inflation levels in Brazil.

12 The income from the commercialization of the carbon credits is essential to maintain the fuel switch, as this change needs more resources than previously to maintain operations. This disparity obviously puts the ceramic in a less competitive situation, which would make the fuel switching and the continued use of the needed machinery unfeasible without the existence of the carbon markets. The monitoring data was kept according to the monitoring plan described in the Project Design Document, version 05. However, the monitoring of the Sustainability indicators was not complete for this first monitoring period, as described on Annex 1 of this report,. This Monitoring Report refers to the first monitoring period of this project, and includes data from 01/09/2010 to 31/12/2011.

13 Table 03. Renewable biomass and cost of delivery heat Ceará Renewable Energy Bundled Project Renewable Biomass Total - Renewable Total Cost of Fuel Net Calorif Value Cost of delivered heat Energy produced (TJ) Biomass (tonnes) (RS) (TJ/ton) (R$/TJ) Babaçu residues 3, R$ 301, R$ 4, Cashew nut shells 4, R$ 797, R$ 8, Coconut residues 3, R$ 198, R$ 3, Mamona husk 1, R$ 108, R$ 4, Wood from sustainable management plan areas 23, R$ 531, R$ 1, Residues from cashew trees 5, R$ 216, R$ 2, Sawdust 15, R$ 680, R$ 3, Total 57, R$ 2,834, R$ 3, Table 04. Cost of delivery heat Comparison (R$ per TJ) Baseline - Cost of delivery heat (R$ per TJ) Projected baseline - Cost of delivered heat for 2011 (R$ per TJ) Monitoring Report: Cost of delivered heat (R$/TJ) Antônio Ceramic R$ 1, R$ 1, R$ 2, Ceagra Ceramic R$ 1, R$ 1, R$ 3, Ceará Ceramic R$ 1, R$ 1, R$ 3, Eliane Ceramic R$ 1, R$ 1, R$ 3, Santa Rita Ceramic R$ 1, R$ 1, R$ 2, Ceará Renewable Energy Bundled Project R$ 1, R$ 1, R$ 3,

14 B.2. Revision of the monitoring plan No revisions on the monitoring plan were made for the current monitoring period. The monitoring data was kept according to the monitoring plan described in the Project Design Document, version 05. Monitoring of the sustainability indicators was based on best available sources of information. However, the monitoring of the Sustainability indicators was not complete for this first monitoring period. More details on the monitoring of sustainability indicators is available on Annex 1 of this report. In response to FAR 1 raised by the Gold Standard Secretariat during project registration, Sustainable Carbon has developed a detailed Study on the surplus of all types of biomass used by the project activity. Hence, the assessment of leakage due to competing uses of biomass was assessed in a more comprehensive manner for this monitoring period. B.3. Request for deviation applied to this monitoring period No requests for deviation were applied to this monitoring period. B.4. Notification or request of approval of changes Not applicable, as no requests were applied on the current monitoring period. SECTION C. Description of the monitoring system The project utilizes the following methodology approved under the Clean Development Mechanism for small scale projects: AMS-I.E: Switch from Non-Renewable Biomass for Thermal Applications by the User, version 04 11, valid from 29/04/2011 to 02/08/2012. The owner of each ceramic was responsible for implementing the monitoring plan. Also, the ceramic employees were responsible for developing the forms and registration formats for data collection and further classification. The authority for the registration, monitoring, measurement and reporting was Mr. Francisco Evanildo de Souza, for Antônio Ceramic, Ceará Ceramic, Ceagra Ceramic and Eliane Ceramic. The authority for these scopes for Santa Rita Ceramic was Mr. Erinaldo Duarte. Monitored data will be kept for two years after the end of the crediting period or the last issuance of carbon credits for this project activity. The management structure was relying on the local technicians with a periodical operation schedule during the monitoring period. The technical team managed the monitoring, the quality control and quality assessment procedures. Monitored parameters are described in Section D. and were monitored with the frequency described in Table below. Table 05. Monitored parameters. Parameters Description Units Origin Frequency This parameter was monitored Measured on PR y Thousands of by employees on each ceramic, a daily or Amount of products ceramic counting the total production. weekly basis. produced in year y pieces Measurements were done by an Data were internal control sheet monitored aggregated on 11 Methodology available at: < Last visited on 08/02/

15 Parameters Description Units Origin Frequency by the project proponent. a monthly and Values used during the project yearly basis. monitoring were taken either from sales reports or from production control documents. Q renbiomass ƒ NRB,y Origin of Renewable Biomass Leakage due to competing uses of biomass Leakage of nonrenewable woody biomass Amount of renewable biomass used during year y of the crediting period Fraction of woody biomass used in the absence of the project activity in year y that can be established as nonrenewable Renewable origin of the biomass This source of leakage is relevant for biomass residues and biomass from existing forests. The quantity of renewable biomass available will be assessed annually to determine the occurrence of leakage This source of leakage assesses the use/diversion of nonrenewable woody biomass saved under the project activity by non-project households/users that previously used renewable energy sources. Tonnes Fraction Not applicable tco 2 e tco 2 e Measured by the biomass providers and controlled by the ceramic owners. Data was calculated from receipts, invoices and other documents regarding the acquisition of biomass Survey methods, as described in Section E.1 Controlled by the ceramic owners Monitored by surveys and publications 12 Monitored by surveys and publications Monthly Annually Annually Annually Annually Checking of According to the Not Sustainable Carbon performed Once every 12 In response to FAR 1 raised by the Gold Standard Secretariat during project registration, Sustainable Carbon has developed a detailed Study on the surplus of all types of biomass used by the project activity. Hence, the assessment of leakage due to competing uses of biomass was assessed in a more comprehensive manner for this monitoring period.

16 Parameters Description Units Origin Frequency all appliances applied two years (kiln) methodology, monitoring shall include checking of all appliances or a representative sample thereof, to ensure that they are still operating or are replaced by an equivalent in service appliance. applicable visual inspections and interviews with the employees on each ceramic factory to confirm the kilns were still operating or were replaced by an equivalent in service kiln. SECTION D. Data and parameters D.1. Data and parameters determined at registration and not monitored during the monitoring period, including default values and factors Data / Parameter: Data unit: Description: Source of data used: Value(s) : Indicate what the data are used for: Additional comment: EF projected_fossilfuel tco 2 /TJ Emission factor for substitution of non-renewable woody biomass by similar consumers. Approved small scale methodology AMS-I.E Switch from Non- Renewable Biomass for Thermal Applications by the User, version tco 2 /TJ In the baseline scenario, non-renewable biomass was used as an energy source. This is the common practice for the red ceramic sector in the project region. As described in Section B.5 of the PDD, Version 05, the use of fossil fuels is the most likely scenario in the absence of nonrenewable biomass. According to the applied methodology, a value of 81.6 tco 2 /TJ shall be used for this emission factor, representing the mix of fossil fuels to be used for the present and future. Data / Parameter: Data unit: Description: Source of data used: NCV biomass TJ/ton Net calorific value of the non-renewable woody biomass that is substituted Approved small scale methodology AMS-I.E Switch from Non- Renewable Biomass for Thermal Applications by the User, version 04. Value(s) : Indicate what the data are This parameter was used to calculate baseline emissions from the use

17 used for : Additional comment: of the fossil fuel that would be used in the baseline scenario. It provides the energy generated by the amount of non-renewable biomass that would be used in the absence of the project. In the baseline scenario, non-renewable biomass was used as an energy source. This is the common practice for the red ceramic sector in the project region. Applied value is recommended by the approved methodology. Data / Parameter: Data unit: Description: Source of data used: ρ biomass Value(s) : 0.88 Indicate what the data are used for : Additional comment: Tonnes/m³ Specific gravity of non-renewable biomass type j -IPCC: Intergovernmental Panel on Climate Change. Orientácion del IPCC sobre las buenas prácticas para UTCUTS - Chapter 3 Table 3A LORENZI, H. Árvores Brasileiras: Manual de Identificação e Cultivo de Plantas Arbóreas Nativas do Brasil, vol.1. 4.ed. Nova Odessa, SP: Instituto Plantarum, Estrutura anatômica da madeira e qualidade do carvão de Mimosa tenuiflora (Willd.). Available at: < Visited on: 08/02/ Poder Calorífico da Madeira e de Resíduos Lignocelulósicos. Available at: < Visited on: 08/02/ IBAMA (Brazilian Institute for Environment and Renewable Resources): acteristica=139. Visited on: 08/02/2012. The amount of wood used in the baseline was measured in volume units. This data was used for the unit conversion. The species used to calculate the average value of this parameter are typical trees of Caatinga Biome that are usually utilized as fuel in the ceramic industries of the region. Data / Parameter: Data unit: Description: Source of data used: Value(s) : BF y Tonnes of wood per thousand of ceramic pieces Quantity of woody biomass per thousand of ceramic units fired in year y Historical data from project proponent for Antônio Ceramic for Ceará Ceramic

18 Indicate what the data are used for : Additional comment: for Ceagra Ceramic for Eliane Ceramic for Santa Rita Ceramic The value was acquired using historical data on woody biomass consumption and production of ceramic pieces when the ceramic used to consume non-renewable wood. Data from year 2009 was used. The value was employed to calculate the real amount of wood displaced to maintain the ceramic production in the baseline scenario. D.2. Data and parameters monitored Data / Parameter: PR y Data unit: Thousands of ceramic pieces Description: Amount of products produced in year y Measured Values used for the calculations were taken from sales reports control /Calculated documents. Measurements were done by an internal control sheet monitored by /Default: the project proponent. Source of data: Controlled by the ceramic owners Value(s) of monitored parameter: Monitoring equipment : Measuring/ Reading/ Recording frequency: Calculation method (if applicable): QA/QC procedures applied: Period September to December 2010 January to December 2011 Antônio Ceramic PR y (thousands of ceramic units) Ceagra Ceramic Ceará Ceramic Eliane Ceramic Santa Rita Ceramic 1,913 9,489 3,808 2,886 4,045 6,592 25,031 10,376 7,974 19,707 Total Monitoring Period 8,505 34,520 14,184 10,860 23,752 No monitoring equipment was used to determine this parameter. Production was counted by trained personnel on each ceramic. This parameter was monitored by employees on each ceramic, counting the total production on a daily or weekly basis. Data was aggregated on a monthly and yearly basis. This parameter was determined individually for each ceramic industry. Data regarding production was monitored through sales control, measured by monthly reports 13. The ceramics have internal controls to assure proper monitoring of this parameter. Data will be compared to the amount of renewable biomass employed. 13 Evidences of sales production control were made available to the verification team.

19 Data will be kept for two years after the end of the crediting period or the last issuance of carbon credits for this project activity, whichever occurs later. Data / Parameter: Data unit: Description: Measured /Calculated /Default: Source of data: Value(s) of monitored parameter: Monitoring equipment: Measuring/ Reading/ Recording frequency: Calculation method (if applicable): Q renbiomass Tonnes Amount of renewable biomass used during year y of the crediting period Measured by the biomass providers and controlled by the ceramic owners It was monitored through purchase invoice, delivery notes or other documents concerning the acquisition of renewable biomasses. September to January to Period December December Total (tonnes) Renewable Biomass Q renbiomass (tonnes) Q renbiomass (tonnes) Babaçu , , Cashew nut shells 1, , , Coconut residues , , Mamona husk , , Wood from sustainable management plan areas 4, , , Residues from cashew trees , , Sawdust , , Total 6, , , These values represent the sum for all ceramics included in the project. The amount of renewable biomass used by each ceramic is available in the Voluntary Emission Reduction calculation spreadsheet for this monitoring period. No monitoring equipment was used to determine this parameter. This parameter was monitored by documents concerning the acquisition of renewable biomasses, counting the biomass purchase on a daily or weekly basis. Data was aggregated on a monthly and yearly basis. Measurement was done by a spreadsheet monitored by the project proponent. The amount of renewable biomass described represents both the biomass fired and biomass stocked in the ceramics. These figures are different than the actual biomass fired on each ceramic. However, in the long term, biomass fired and biomasses purchased are likely to be similar. Biomass providers measure the amount of products delivered to the ceramics to determine due financial compensation. In case any renewable biomass was measured in volume, default values of specific gravity were used to convert it to tonnes. Values below were applied for the given biomass types: Biomass type Specific gravity (tonnes/m³) Coconut residues 0.5

20 Residues from cashew trees 0.42 Sawdust 0.25 Wood from sustainable 0.88 management plan areas Cashew nut shells 0.34 QA/QC procedures applied: Data / Parameter: Data unit: Description: Source of data: Value(s) of monitored parameter: Brief description of measurement methods and procedures applied: QA/QC procedures applied: Any comment: These values were taken from the sources below: - Coconut residue and residues from cashew trees: LORENZI, H. Árvores Brasileiras: Manual de Identificação e Cultivo de Plantas Arbóreas Nativas do Brasil, vol ed. Nova Odessa, SP: Instituto Plantarum, Sawdust: PINHEIRO, G.F., RENDEIRO, G., PINHO, J.T. Densidade Energética de resíduos vegetais. Available at: Last visited on February 09 th, Wood from sustainable management plan areas: considered to be the same as for native firewood. Please check parameter ρ biomass on section D.1 for more information. - Cashew nut shells: OGUNDIRAN, M.B., BABAYEMI, J.O.,NZERIBE, C.G. Determination of metal content and an assessment of the potential use of waste cashew nut ash (CNSA) as a source for potash production. Available at: BC_Determ_Metal_Cashew_Nut_Ash_Potash_1329.pdf. Last visited on February 09 th, The amount of renewable biomass purchased was controlled with digital spreadsheets filled by third party consultants. Sustainable Carbon has double checked these spreadsheets against biomass invoices to detect inconsistencies. The ceramics will store all documents related to the purchase or acquisition of renewable biomass. Data was compared to production output. Data will be kept for two years after the end of the crediting period or the last issuance of carbon credits for this project activity, whichever occurs later. ƒ NRB,y Fraction or percentage Fraction of woody biomass used in the absence of the project activity in year y that can be established as non-renewable using survey methods Survey methods for Antônio Ceramic for Ceará Ceramic for Ceagra Ceramic for Eliane Ceramic for Santa Rita Ceramic The monitoring of this parameter was based on national and international articles, databases and data monitored by the project developer such as project activities at the same region. The sources provided information about the availability of woody biomass in the Caatinga biome, as described on section B.6.3. of the Project Design Document Form, version 05. Data from published sources were used to determine this parameter. Data will be kept for two years after the end of the crediting period or the last issuance of carbon credits for this project activity, whichever occurs later. The

21 monitored value for this parameter is equal to the figures described in version 05 of the PDD. As the PDD was completed on 08/03/2012. It contains the most recent information available to determine ƒ NRB,y. Data / Parameter: Data unit: Description: Measured /Calculated /Default: Source of data: Value(s) of monitored parameter: Monitoring equipment: Measuring/ Reading/ Recording frequency: Calculation method (if applicable): QA/QC procedures applied: Data / Parameter: Data unit: Description: Measured /Calculated /Default: Source of data: Value(s) of monitored parameter: Origin of Renewable Biomass Not applicable Renewable origin of the biomass The guarantee of acquiring renewable wood was achieved by invoices from the providers. Biomasses were considered renewable as fulfilling the options described in the methodology applied. Controlled by the ceramic owners Not applied for the calculation. All biomass used during the crediting period are demonstrably renewable, since they comply with CDM definitions of renewable biomass. No monitoring equipment was used to determine this parameter. Each monitoring period Not applicable Ceramic owners will store invoices, receipt of sales or other documents to allow the traceability of the renewable biomass. Leakage due to competing uses of biomass tco 2 e This source of leakage was relevant for biomass residues and biomass from existing forests, according to the general guidance on leakage in biomass project activities. The quantity of renewable biomass available was assessed annually to determine the occurrence of leakage. Calculated Surplus of each type of renewable biomass used by the project activity was assessed by Sustainable Carbon from July to October Information on the biomass availability and consumption was assessed by Sustainable Carbon following a methodological plan that was based on the application of questionnaires to relevant biomass experts, producers and suppliers. An independent third party expert opinion on the results and findings of such study was obtained, to ensure the results are appropriate and conservative. Leakage emissions are calculated as 24,403 tco 2 e in this monitoring period, as detailed below: Year Leakage emissions (tco 2 e) , ,053 Total 24,403

22 The following surplus of each biomass is considered, as based on a study developed by Sustainable Carbon. More details are available on Section E.3. Biomass type Surplus (%) Year Cashew nut shell 45% 2010/2011 Residues from cashew tree 25% 2010/2011 Coconut residues 1,444% for dry coconut 2010/2011 3,491% for green coconut Babaçu residues 83% 2010/2011 Mamona Husk 2,206% 2010/2011 Sawdust 65% 2010/2011 Wood from sustainable 2010/ % management areas Monitoring equipment: Measuring/ Reading/ Recording frequency: Calculation method (if applicable): QA/QC procedures applied: Data / Parameter: Data unit: Description: Measured /Calculated /Default: Source of data: Value(s) of monitored parameter: Monitoring equipment: Measuring/ Reading/ No monitoring equipment was used to determine this parameter. Annually Leakage emissions due to the competing use of are considered for wood from sustainable forest management area, since the surplus of such biomass was assessed as lower than 25%. Leakage emissions were calculated according to procedures described on Approved consolidated baseline and monitoring methodology ACM0006, version More details on the calculation method are described on Section E.3. An independent third party expert opinion on the results and findings of the assessment of biomass surplus was obtained, to ensure the results are appropriate and conservative. Leakage of non-renewable woody biomass tco 2 e Leakage relating to non-renewable woody biomass The source of leakage from non-renewable biomass was monitored according to the applied methodology. Monitored 0 (zero). It was assumed that no emissions occur due to this source, as explained in Section B.6.1. of the Project Design Document, version 05. No monitoring equipment was used to determine this parameter. Annually 14 Methodology available at: Last visited on 27/11/2012.

23 Recording frequency: Calculation method (if applicable): QA/QC procedures applied: Not applicable Data available regarding the ceramic industry fuel consumption was employed to monitor the leakage. Data / Parameter: Data unit: Description: Measured /Calculated /Default: Source of data: Value(s) of monitored parameter: Monitoring equipment: Measuring/ Reading/ Recording frequency: Calculation method (if applicable): QA/QC procedures applied: Checking of all appliances (kiln) Not applicable Checking of all appliances (kiln) This parameter is determined by interviews and visual inspections. Ceramic owners and employees Not applicable. All kilns on each ceramic factory were in operation during all months of the monitoring period No monitoring equipment was used to determine this parameter. Once every two years Not applicable Visual inspections and interviews with employees on each ceramic are made to ensure that kilns are still operating or are replaced by an equivalent in service appliance. SECTION E. Emission reductions calculation E.1. Baseline emissions calculation Baseline emissions were estimated following procedures of the applied methodology: AMS- I.E:Switch from Non-Renewable Biomass for Thermal Applications by the User, version 04 15, valid from 29/04/2011 to 02/08/2012. The project activity in this monitoring period (16 months) generated 949TJ, or 712 TJ per year. Converting this number to MWh, it was generated 197,771 MWh per year, which corresponds to the use of 23 MWthermal on average of the kilns capacity during the monitored period, which is less than the limits of 45 MWthermal for Type I Small scale project activities. 15 Methodology available at: < Last visited on 11/05/2011.

24 Baseline Emission (Equation 01) Where: ER y : B y : ƒ NRB,y : NCV biomass : EF projected fossil fuel : Emission reductions during the year y in tco 2 e Quantity of woody biomass that was substituted or displaced in tonnes Fraction of woody biomass used in the absence of the project activity in year y that was established as non-renewable biomass using survey methods Net calorific value of non-renewable woody biomass that was substituted, in TJ/ton Emission factor for substitution of non-renewable woody biomass by similar consumers, in tco 2 e/tj 16. B y was calculated according to option (a) of the selected methodology, as follows: (a) B y was calculated as the product of the number of appliances multiplied by the estimate of average annual consumption of woody biomass per appliance (tonnes/year); The consumption of woody biomass in the kilns was calculated as the amount of products (ceramic pieces) produced and the consumption of woody biomass per thousand of ceramic pieces fired in year y, as follows: (Equation 02) Where: PR y : Amount of products produced in year y, in thousand of ceramic pieces BF y : Quantity of woody biomass per thousand of ceramic units fired in year y. The value of BF y was determined with the use of the historical records from the ceramics included in the project, by dividing monthly average consumption in the baseline by monthly average baseline production. According to procedures on the applied methodology, the project participants determined the shares of renewable and non-renewable woody biomass in B y using nationally approved methods. Also, the following principles were taken into account: Demonstrably Renewable woody biomass 17 (DRB) Woody biomass is renewable if one of the following two conditions is satisfied: 1. The woody biomass is originating from land areas that are forests 18 where: (a) The land area remains a forest; (b) Sustainable management practices are undertaken on these land areas to ensure, in particular, that the level of carbon stocks on these land areas does not systematically decrease over time (carbon stocks may temporarily decrease due to harvesting); and (c) Any national or regional forestry and nature conservation regulations are complied with. 16 According to the applied methodology, a value of 81.6 tco2/tj shall be used for this emission factor, representing the mix of fossil fuels to be used for the present and future. 17 This definition uses elements of Annex 18, EB 23. Document available at: < Last visit on 10/02/ The forest definitions as established by the country in accordance with the Decisions 11/CP.7 and 19/CP.9 should apply.

25 2. The biomass is woody biomass and originates from non-forest areas (e.g. croplands, grasslands) where: (a) (b) (c) The land area remains cropland and/or grasslands or is reverted to forest; Sustainable management practices are undertaken on these land areas to ensure in particular that the level of carbon stocks on these land areas does not systematically decrease over time (carbon stocks may temporarily decrease due to harvesting); and Any national or regional forestry, agriculture and nature conservation regulations are complied with. Non-renewable biomass Non-renewable woody biomass (NRB) is the quantity of woody biomass used in the absence of the project activity ( B ) minus the DRB component, as long as at least two of the following supporting indicators are shown to exist: y A trend showing an increase in time spent or distance travelled for gathering fuel-wood by users (or fuel-wood suppliers) or alternatively, a trend showing an increase in the distance the fuel wood is transported to the project area; Survey results, national or local statistics, studies, maps or other sources of information such as remote sensing data that show that carbon stocks are depleting in the project area; Increasing trends in fuel wood prices indicating a scarcity of fuel-wood; Trends in the types of cooking fuel collected by users, suggesting scarcity of woody biomass. Thus the fraction of woody biomass saved by the project activity in year y that was established as nonrenewable: NRB f NRB, y = (Equation 3) NRB + DRB Before the project activity, wood from areas without forest management was offered with low prices and high viability to the ceramic owner. Thus, the majority of the fuel employed in the baseline scenario was from non-renewable origin. A fraction of baseline fuel was from sustainable origin, namely woody biomass for which a DOF (Documento de Origem Florestal, Forest Origin Document) was available. According to the IBAMA Normative Instruction Nº 112 from 21/08/ , the entrepreneur who uses raw material from native forests is obliged to use the DOF to control the origin, transportation, and storage of forest products and by-products. This document ensures that the related forest products were obtained from legalized areas where conservation measures are applied. Therefore, firewood with DOF was considered renewable, since it complies with item 1 of the definition of renewable biomass. The ƒ NRB,y parameter was determined in two steps: the first step was based on project specific information regarding the amount of native firewood from areas without forest management and the amount of firewood with DOF. This provides a fraction of non-renewable biomass used in the baseline scenario based on the origin of the firewood. The second step was an assessment on the fraction of woody biomass used that could be established as non-renewable biomass using survey methods applied 19 BRASIL. INSTRUÇÃO NORMATIVA IBAMA Nº 112, DE 21 DE AGOSTO DE Available at: < Visited on 10/02/2012.

26 to the Caatinga biome, where the project is located. Such assessment was based on Annex 20 of the 35 th meeting of the Small Scale Working Group of the Clean Development Mechanism, which provides a methodology for the calculation of ƒ NRB,y 20. A description of such methodology follows: On a project-specific basis, project participants determine the shares of renewable (DRB) and non-renewable woody biomass (NRB) in the total biomass consumption. This has been performed in the first step, as described above. A default value for ƒ NRB,y in the Caaringa biome was derived by calculating Total Annual Biomass Removals (R) in this biome as a proxy for By and estimating the proportion of R that was demonstrably renewable (DRB) and non-renewable (NRB). The following equation was used: (Equation 4) Where: R Total annual biomass removals (tonnes/year) Total Annual Biomass Removals (R) for each country is inferred by calculating the sum of the Mean Annual Increment in biomass growth (MAI) and the Annual Change in Living Forest Biomass stocks ( F). Given biomass growth (MAI) and change in stock ( F) are both known, the balancing removals (R) was calculated as the sum of the two, as below: (Equation 5) Where: MAI Mean Annual Increment of biomass growth (tonnes/year) F Annual change in living Forest biomass (tonnes/year) Mean Annual Increment of biomass growth (MAI) was calculated in equation below as the product of the Extent of Forest (F) in hectares and the country-specific Growth Rate (GR) of the Mean Annual Increment: (Equation 6) Where: F Extent of forest (ha) GR Annual growth rate of biomass (t/ha-yr) Demonstrably renewable biomass (DRB) was calculated in equation below as the product of Protected Area Extent of Forest (PA) in hectares and the country-specific Growth Rate (GR) of the Mean Annual Increment: (Equation 7) Where: PA Protected Area Extent of Forest (ha) This approach was considered appropriate since it took in consideration historical practices of the ceramics involved in the project in regard to fuel usage, meaning only native firewood from areas without forest management were considered as non-renewable. Also, choosing the biome where the project is located as the geographical boundary for the second step is a more accurate approach than performing a national assessment, given the dimensions and peculiarities of each biome in Brazil and considering that sub-regional information is not available nor feasible to obtain. Also, there is evidence to support that carbon stocks are depleting in the project area 21 and that there is a trend showing an increase in time spent or distance travelled for gathering fuel-wood by users Document is available at: < Last visited on 07/03/ The Second Brazilian Inventory of Anthropogenic Emissions and Removals of Greenhouse Gases provides data on net carbon emissions from Land Use Change for each Brazilian biome on Table 3.111, page 249. Net carbon emissions for the

27 E.2. Project emissions calculation The applied methodology does not include any source of project emissions. E.3. Leakage calculation Leakage is estimated as 24,403 tco 2 e during the current monitoring period. The Category AMS-I.E predicts the following possible three sources of leakage: A) If the project activity includes substitution of non-renewable biomass by renewable biomass, leakage in the production of renewable biomass must be considered. Leakage from the use of renewable biomass was considered using the general guidance on leakage in biomass project activities (attachment C of Appendix B) 23. Also, the specific rules on biomass resources as set out in the applicable version of the Gold Standard, especially ToolKit Annex C were complied with. For this project activity, the following sources of leakage were included: A. Shifts of pre-project activities; B. Emissions related to the production of Biomass, and C. Competing uses for the biomass. The Attachment C to Appendix B of the Indicative simplified baseline and monitoring methodologies provides different emission sources based on type of biomass being considered. For biomass from forests and biomass from croplands or grasslands, the project boundary included the area where the biomass was extracted or produced. Table below summarizes the sources of leakage. Table 06. Sources of leakage according to the type of the biomass. Biomass Type Biomass from forests Biomass from croplands or grasslands (woody or nonwoody) Activity/Source Shift of pre project activities Emissions from biomass generation/ cultivation Competing use of biomass Existing forests - - X New forests X X - In the absence of the project the land would be used as a X X - cropland/wetland In the absence of the project the land will be abandoned - X - Caatinga biome indicate carbon pools have constantly decreased between 1990 and Document available at: < Last visit on 15/3/ DA SILVA, E.R. A exploração da lenha da caatinga como fonte de energia para as lavanderias de jeans em Toritama Pernambuco. Information on Page 2 shows increasing distances to obtain firewood in the Caatinga biome. Document available at: < >. Last visited on 23/03/ Document available at: < Last visit on 10/02/2012.

28 Biomass Type Activity/Source Shift of pre project activities Emissions from biomass generation/ cultivation Competing use of biomass Biomass residues or waste Biomass residues or wastes are collected and use. - - X Observing the table above, the sources of leakage relevant to the present project activity are the competing use of biomass for biomass from existing forests and for biomass residues or waste. In response to FAR 1 raised by the Gold Standard Secretariat during project registration, Sustainable Carbon has developed a detailed Study on the surplus of all types of biomass used by the project activity. Such study was developed from July to October, 2012, and included the following steps: 1. A review of the production chain of all biomass types being analyzed; 2. Identification of relevant agents and scheduling of interviews; 3. Development of questionnaires for data collection from biomass experts, producers and suppliers; 4. Interviews and application of the questionnaires; 5. Compilation of data obtained; 6. Interpretation of data obtained; 7. Development of a Report on the biomass surplus; 8. Review of the report and expert opinion on the surplus of renewable biomass; In total, 81 questionnaires were applied and information was collected from 16 experts, 51 producers and 14 suppliers of biomass. Experts interviewed belong to respectful research or commercial institutions whose work is related to biomass research or production. The study by Sustainable Carbon was a pioneering effort to thoroughly document the surplus of the biomass types used by the project. There are gaps still to be filled regarding the renewable biomass supply chain in the State of Ceará, due to the lack of available information. Nonetheless, this study has provided a robust analysis of existing sources of information, and included two rounds of field trips for interview and local data collection with biomass experts and producers. Also, an expert with significant background experience as an auditor for carbon projects (both voluntary and compliance projects) was hired to provide an independent opinion on the results and findings of Sustainable Carbon study. A detailed report on such study was prepared and made available for the verification DOE. The summarized results and conclusions are presented below: Results: Table below provides the biomass availability and consumption in the State of Ceará, as informed by biomass experts 24. It was not possible to obtain quantitative information for Babaçu residues. 24 This table provides an average of all answers from experts. Only experts that have informed both biomass availability and consumption were included in the assessment, to provide a coherent quantification.

29 Table 07. Quantitative information on biomass availability and consumption. The biomass surplus is expressed both in tonnes and in percentage. The surplus expressed in tonnes is calculated as biomass availability minus biomass consumption. Meanwhile, the surplus expressed in percentage is calculated as: Biomass surplus (%) = ( Biomass Availability / Biomass consumption ) - 1 The above equation allows determining if the quantity of available biomass in the region is at least 25% larger than the quantity of biomass that is utilized. As available above, quantitative answers from biomass experts demonstrate the availability of biomass is at least 25% larger than its consumption for the following biomass types: cashew nut shells, coconut residues and residues from cashew trees. No quantitative information was obtained for babaçu residues and sawdust, while quantitative data for wood from sustainable forest management areas is inconsistent. Tables below provide a summary of quantitative data and the interpretation of qualitative responses from biomass experts, producers and providers. Table 08. Summary on the assessment of biomass surplus (quantitative and qualitative data).

30 Table 09.Summary on the assessment of biomass surplus (percentage of responses indicating a surplus equal to or above 25%). According to quantitative data from experts (available on Table 07), the biomass available is at least 25% larger than the consumption for the following biomass types: cashew nut shells, coconut residues, Mamona husks and residues from cashew trees. No quantitative information was obtained for babaçu residues and sawdust, while quantitative data for wood from sustainable forest management areas is inconsistent and does not allow for the assessment of surplus. A similar scenario was shown by the interpretation of qualitative answers from experts regarding the final destination of cashew nut shells, coconut residues, Mamona husks and residues from cashew trees. Most of the experts interviewed were of the opinion that a significant fraction of these types of biomass are currently discarded or sub utilized. Information for sawdust was affected by relevant barriers during the course of the study. As described on Section 3.6 of the Report on the biomass surplus, there are many informal sawmills and furniture industries, which affect official data and the estimates from biomass experts. Sawdust is a significant concern for local producers, since the environmental authorities require them to provide a correct destination to such residues. Also, the risk of uncontrolled fire was mentioned by the respondents as an important factor associated to the handling of sawdust. Hence, data collected from questionnaires was probably underestimated, as local entrepreneurs were not willing to provide accurate information on the production of residues. Instead, respondents have likely provided figures consistent with official data, to avoid disclosing information that could compromise them. Two of the experts interviewed informed there is a significant fraction of this biomass being discarded or sub utilized (the average result being equal to 65%). Quantitative information in a state level was not obtained as part of this study. Field surveys allowed to identify there is a large amount of sawdust that does not have a proper destination, although both official data and the questionnaires from producers indicate otherwise. Hence, Sustainable Carbon considers that data collected during this study does indicate there is abundant biomass in the project region to avoid the possibility of competing uses of biomass due to the project implementation. In regard to wood from sustainable forest management areas, data collected was affected by misconceptions on the terms biomass availability and surplus, as defined by the relevant guidance from the Clean Development Mechanism. This misconception has probably resulted in the under estimation of biomass surplus, since part of the information collected refers to the amount of wood harvested, not to the amount of wood available in forest management areas. Additional information gathered on October 2012 seems to demonstrate the surplus of biomass could be similar to or higher than 25%.